Corporate Income Tax Law Update 2024: Guide to Determining Taxable Revenue

This article provides a detailed guide on how to determine taxable corporate income tax (CIT) revenue under the CIT Law 2023 (amended and supplemented 2024). The content includes:

 

  • Key changes in determining taxable revenue in the CIT Law 2024
  • Step-by-step guide to determining taxable CIT revenue
  • CIT calculation method
  • Specific cases when determining taxable CIT revenue
 

1. Key changes in determining taxable revenue in the CIT Law 2024

Expanded definition of taxable revenue: Includes revenue from capital transfer activities, investment income, financial income, etc. 

Adjustment of revenue determination methods: Businesses can choose to apply one or more revenue determination methods that are suitable for their business activities, including:

  • Deduction method: Applies to businesses selling goods and finished products.
  • Direct method: Applies to businesses providing services or selling goods and finished products on a prepayment basis.
  • Percentage method: Applies to businesses providing services with difficult-to-determine income.

Detailed regulations on deductible income when calculating CIT: Includes production and business costs, management costs, financial costs, depreciation costs, etc. 

Raise CIT tax rates for some cases: Specifically, the CIT tax rate for lottery and electronic gaming businesses with prizes is raised from 20% to 35%.

Other new points:

  • Regulations on the calculation period of CIT for income from capital transfer activities, investment income, and financial income.
  • Regulations on deducting expenses before determining taxable revenue for some cases.
  • Regulations on calculating CIT for businesses with business activities in many countries.

2. Step-by-step guide to determining taxable CIT revenue

Step 1: Determine revenue

  • Revenue from the sale of goods and finished products: The actual amount collected from the sale of goods and finished products, including surcharges, additional charges, and VAT that the business is entitled to.
  • Revenue from the provision of services: The actual amount collected from the provision of services, including surcharges, additional charges, and VAT that the business is entitled to.
  • Revenue from other activities: Other income from the business activities of the business, including: interest on bank deposits, interest on loans, income from investment activities, etc.

Step 2: Determine deductible expenses when calculating tax

  • Production and business costs: Including material costs, labor costs, depreciation costs, selling costs, management costs, etc.
  • Financial costs: Including interest expenses, foreign exchange market, insurance costs, etc.
  • Depreciation costs: Including depreciation of fixed assets, intangible assets, etc.
  • Other deductions: According to the provisions of the CIT Law.

Step 3: Calculate taxable revenue

Taxable revenue = Revenue – Deductions when calculating CIT

Step 4: CIT calculation method:

CIT = Taxable revenue x Tax rate

In which:

  • Taxable revenue: Revenue after deducting exempt income and deductions when calculating CIT.
  • Tax rate:
    • 20%: Applies to most businesses.
    • 32% – 50%: Applies to businesses exploiting minerals, oil, and gas.
    • 10%: Applies to businesses dealing in social housing.

Example: ABC Company is a business that manufactures and sells furniture. In 2024, ABC Company had revenue from the sale of goods and finished products of 100 billion dong; production and business costs of 60 billion dong; financial costs of 10 billion dong; and depreciation costs of 5 billion dong.

Step 1: Determine revenue: Revenue = 100 billion dong

Step 2: Determine deductible expenses when calculating tax: Total deductible expenses when calculating tax = Production and business costs + Financial costs + Depreciation costs = 60 billion dong + 10 billion dong + 5 billion dong = 75 billion dong

Step 3: Calculate taxable revenue: Taxable revenue = Revenue – Total deductible expenses when calculating tax = 100 billion dong – 75 billion dong = 25 billion dong

Step 4: Calculate CIT: CIT = Taxable revenue x Tax rate = 25 billion dong x 20% = 5 billion dong

Conclusion: ABC Company’s CIT payable in 2024 is 5 billion dong.

3. Specific Cases when Determining Taxable CIT Revenue

  • Revenue from capital transfer activities: Revenue from the transfer of ownership of assets, including land, houses, vehicles, etc.
  • Investment income: Income from investments in assets such as stocks, bonds, mutual funds, etc.
  • Financial income: Income from activities such as lending, insurance, etc.
Case Study
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